Caixin
Aug 05, 2019 10:44 AM

In Depth: The Fake Engagement Powering China’s Internet

A person uses a smartphone in Yangzhou, Jiangsu province,on Jan. 29, 2019. Photo: VCG
A person uses a smartphone in Yangzhou, Jiangsu province,on Jan. 29, 2019. Photo: VCG

An intergenerational rivalry between two pop stars in July drew public attention to the vast network of fake traffic generators that underpins much of the Chinese internet.

It started with a comment on Douban, an entertainment review platform. “Why is it so hard to buy tickets for Jay Chou’s concerts even though his online numbers are so bad?” one commenter wrote.

That angered many of Taiwan-based singer Chou’s fans, who tend to be older millennials born in the 1980s and 1990s. The fans rallied together to publish posts and share content related to Chou on the Twitter-like Weibo social media platform. They eventually succeeded on July 21 in putting their 40-year-old idol at the top of Weibo’s popularity charts and pushing out previous chart topper Cai Xukun, a 21-year-old boy band leader whose career has been largely dependent on his internet presence.

But by July 22, an administrator for Chou’s community page was saying that many of the posts relating to Chou did not appear to be genuine and that posting on Chou’s page would now be restricted for some users. What started out as a show of enthusiasm by diehard fans had now been hijacked by fake online traffic producers.

Just about every part of the Chinese internet that relies on mass engagement has developed a shadow ecosystem of fake engagement vendors and buyers. The motivation is simple: money. Numbers of clicks, followers, buyers and sellers drive vast amounts of advertising revenue as well as investment.

Nearly a third of China’s internet traffic in 2018 was rated “abnormal,” according to a report by third-party advertising data monitor Miaozhen Systems. The resulting loss to advertisers reached more than 26 billion yuan ($3.75 billion), Miaozhen Systems found.

According to figures released by Alibaba at the end of 2018, there were at least 2,800 organizations in China specializing in faking e-commerce activity, including 2,384 group chats on the QQ messaging platform and 290 empty-parcel trading platforms. More than half of the people working in fake e-commerce traffic are under the age of 30, according to Alibaba, with large numbers of college students and young working adults being recruited offline on campuses to simulate real purchasing behavior.

E-commerce platforms depend on gross merchandise volume (GMV), a figure that sums up the total value of goods sold on a platform without taking into account returns, as a metric for measuring growth and attracting investment. Faking GMV figures has long been a common practice among e-commerce platforms, industry sources previously told Caixin. Tactics include shipping empty parcels to fake online transactions.

False idols

Zombie Weibo followers usually go for 10 yuan ($1.44) per 10,000 followers, although for a higher price “advanced zombies” with avatars and content expressing fake opinions can also be purchased, one person familiar with the industry told Caixin. Despite a large-scale cleanup of fake Weibo followers in 2015, the person said they were able to retain most of the 1 million fans they bought in 2013.

In February, Weibo set the upper limit for displaying the number of re-blogs and comments on a post to “1 million +,” but reducing the data displayed on the front end of the platform hasn’t been enough to curb fake traffic.

On one hand, flaws in Weibo’s real-name registration system allow fake traffic operators to create false accounts en masse. At the same time, Weibo’s dependence on celebrities and online influencers to attract user activity has fed the platform’s reluctance to fully eradicate fake traffic operators.

Fan clubs function as complete fake traffic generating systems for the objects of their obsession — most fan clubs have formed their own creative departments, copywriters, video producers, finance departments, and traffic teams, one member of an idol fan club told Caixin. The traffic team’s daily responsibilities include pumping up idols’ engagement figures as well as controlling critical comments, the person said.

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However, compared with the 30,000-odd entertainment stars on Weibo, the 400,000 or so influencers or “key opinion leaders” on the platform form the bulk of the customer base for fake traffic operators. Fake traffic is ubiquitous among these influencers.

“In order for advertisers to look at influencers, they must have at least 1 million fans,” one person from an intermediary company told Caixin.

More than 300 of the top 500 key opinion leaders on an unnamed social media platform had benefited from fake traffic, according to a report by Tencent’s Waterproof Wall, a unit focused on fighting fake traffic.

Sunken cities

Modern-day advertisers are dependent on software and algorithms to decide where most of their online ads should be placed and to bid and pay for advertising space on online ad exchange platforms. But this system, known as “programmatic” ad buying, is vulnerable to exploitation by fake traffic operators.

Wang Jie (a pseudonym) spends several hours a day “doing tasks and earning gold coins” on an app she downloaded after a friend recommended it, she told Caixin. In the third-tier northern Chinese city where she lives, many others have two or three such apps on their phones.

Qutoutiao, a mobile content aggregator, is one of these apps. In September 2018, just two years after it was launched, Qutoutiao listed on Nasdaq, piquing investors’ interest in its model, which involves rewarding users with virtual coins or cash for completing small tasks like leaving reviews, filling out questionnaires and sharing content from the app on their own social media pages. Users are also rewarded for inviting their friends to download and use the app.

Multiple copycats including the similarly named Jutoutiao have appeared on the market, primarily targeting users in smaller Chinese cities — third- and fourth-tier cities commonly referred to in Chinese as “sunken markets” whose consumption potential has yet to be “excavated” compared with richer, larger cities.

Qutoutiao got its early success from search giant Baidu’s traffic distribution “alliance,” a group of platforms that helped direct traffic to ads sold by Baidu. Users’ engagement with Baidu customers’ ads on Qutoutiao would count toward the ads’ total engagement figures, allowing Baidu to demand higher fees from advertisers. In 2016, Baidu accounted for 69.9% of Qutoutiao’s revenue, and in 2017, 43.7%. Revenue soared almost 10-fold from 8 million yuan to 78.1 million yuan from 2016 to 2017.

Officially, Baidu prohibits its traffic alliance members from obtaining traffic through automatic clicks, forced clicks and automatic refreshes, but Qutoutiao’s model of incentivizing engagement with cash gets around this rule while arguably still faking genuine engagement.

Regulators have already begun tightening their grip on fake traffic generators like Qutoutiao and copycat apps. On June 18, Shanghai’s municipal market regulator summoned executives from Qutoutiao, Huitoutiao and other content aggregation apps for a meeting at which they were admonished for failing to properly manage their platforms and for allowing illegal advertisements. Qutoutiao’s Nasdaq-listed shares have lost 70% of their value since March.

Empty parcels

On Taobao, Alibaba’s online marketplace, product search results are often ranked based on number of items sold, meaning stores have an incentive to inflate sales numbers to get their products into the top search results.

Aside from online tactics like placing fake orders, publishing fake positive product reviews and deleting negative reviews, merchants go so far as to fake logistics data by sending empty parcels.

With the help of law enforcement authorities, Alibaba launched a major crackdown on fake e-commerce sales around the time of the company’s New York Stock Exchange IPO in September 2014. One fake sales operator, a person surnamed Li, was eventually sentenced in 2017 to five years and six months in prison and a 900,000 yuan fine for faking orders on Taobao in China’s first criminal case involving fake e-commerce orders.

One source, a long-time employee of Alibaba, told Caixin that e-commerce platforms would turn a blind eye to fake orders during the annual Double Eleven shopping festival in November. “Everyone has key performance indicators — as long as the fake order organizations aren’t committing too serious a crime, (the platforms) don’t bother,” the source said.

In July, a Caixin investigation revealed that e-commerce giant Suning.com may have fabricated orders by sending empty shipments, complete with fake consignment notes, to a company linked to Camsing Global LLC, a conglomerate at the center of an ongoing fundraising scandal.

Nonexistent gamers

In May, Beijing’s Internet Court settled its first lawsuit involving fake online game metrics. One litigant, surnamed Xu, asked the other litigant, a person named Chang, to supply real clicks for a mobile game at a rate of 0.9 yuan per 1,000 unique visitors.

But, after the clicks were delivered, Xu said 40% of the 28 million clicks were made by fake, machine-generated users and refused to pay Chang the full fee, prompting Chang to file a lawsuit against Xu.

The court eventually decided that the contract between Chang and Xu was invalid and resulted in illegal profits.

Across the mobile game industry, an average of 20% of the traffic for each game is likely to be fake, according to Umeng, a Chinese third-party data analysis firm.

Fake traffic operators are constantly changing their tactics to evade detection. Currently, the most popular way to create fake game traffic is to rent a large number of real people’s gaming accounts through social networks before connecting the accounts to software that automatically clicks and interacts with apps, Caixin learned.

Backlash

The golden age of fake online traffic in China is already over, multiple sources familiar with the fake traffic industry told Caixin. The industry expanded the fastest between 2011 and 2017 as Chinese consumers rapidly adopted mobile internet technology.

Additionally, the current slowdown in economic growth and cooling of China’s venture capital market have made it less rewarding for startups to fake traffic to attract investors.

In 2019, “many product managers and even CEOs and CFOs have begun to really care about where users are,” Zhang Jun, the chief data scientist at Umeng, told Caixin.

At the same time, advertisers who are now suspicious of the digital advertising supply chain are increasingly focusing on “private domain traffic,” which is traffic that directly involves software and social media accounts owned by advertisers themselves.

“Internet dividends are disappearing, and the emphasis everywhere is on fine-tuning operations,” Zhang said. “The first step is to screen out fake traffic and then see what channels are truly valuable.”

This story has been edited to clarify the kind of Weibo activity Jay Chou's fans were engaging in.

Contact reporter Teng Jing Xuan (jingxuanteng@caixin.com)

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